Figure 13-2
-In the figure above, suppose that the Fed maintains a constant interest rate, commodity prices are fixed, and that commodity demand is unstable ranging from IS0 to IS1. Equilibrium real output would then range from

Question

Figure 13-2 
-In the figure above, suppose that the Fed maintains a constant interest rate, commodity prices are fixed, and that commodity demand is unstable ranging from IS0 to IS1. Equilibrium real output would then range from

Quizplus · Accepted Answer

In the given scenario, with a constant interest rate and fixed commodity prices, the only variable that can change the equilibrium level of output is the demand for commodities. As the commodity demand fluctuates between IS0 and IS1, the equilibrium level of output will also fluctuate. This is indicated by the movement of the AD curve from AD0 to AD1, intersecting the SRAS curve at points B0 and B1. Therefore, the range of equilibrium real output would be B0 to B1.

Figure 13-2 -In the Figure Above, Suppose That the Fed Maintains a Fed